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2001-07-01 16:07:00

We’re married. How does the state go about paying for our long-term care costs?

Question:John is 76 and his wife Mary is 72. They have two grown children, both still raising their own families. John has diabetes, which is diet-controlled, and high blood pressure, which is controlled through medication. Mary has arthritis, concentrated mainly in her wrists and left knee, but only takes aspirin pain relievers as needed. She feels like someday she might need a knee joint replacement. Together they have a guaranteed income of $1800 per month, made up of his Social Security check of $1056, and her Social Security check of $764. They own their home valued at $80,000, with no mortgage. John has a life insurance policy with $14,000 in cash value. They own a car valued at $12,000. They have approximately $60,000 in CDs and $15,000 in savings. They have elected for all of the earnings and interest on these CDs and savings to be re-invested, which amounts to approximately $3600 per year. Their household budget is approximately is $1525 per month. If possible, they would like to leave as much of their estate to their 4 grandchildren. What should they do?

Answer:Do nothing: If they choose to do nothing, and one of them would require Long-Term Care within the next few years... a nearly 80% probability (Source: U.S. General Accounting Office, Long-Term Care: Diverse, Growing Population Includes Millions of Americans of All Ages), they could expect a monthly cost of anywhere between $2000 and $5000 per month, depending on the type of care needed and where that care might be received. This monthly expense of course would play havoc with their finances. After exhausting all efforts to get all of the benefits they could from Medicare and their Medicare Supplement (which would be little if any), the first thing they would do is to apply for a Spousal Division of Assets with the Department of Social and Rehabilitative Services (SRS).  This process would allow roughly half of all of their assets under $168,240 to be protected (this amount goes up each year in May... and the minimum that can be protected is $16,824). For purposes of discussion, we will call the spouse needing care the "ill spouse", and the spouse not needing care the "well spouse". Under certain circumstances their home and their car would be exempt. These circumstances might include but not be limited to the fact that the well spouse resides there, the ill spouse intends to return, they are making a bona fide effort to sell, etc. SRS Policy states certain reasons to exempt the home.  If none of them fit, it is not exempt.  Also, the value of the home would be included if it had been placed in a revocable trust.  The most liquid assets would be put in the name of the ill spouse.  The remainder of the assets would be placed in the name of the well spouse.  The assets that would then be in the name of the ill spouse would have to be spent down, on care, until these assets amounted to $2,000.  John and Mary would not actually have to move these assets until their total assets equal the determined well spouse allowance plus $2,000 for the ill spouse. Given the above situation for John and Mary, and assuming the home was exempt, this would amount to $89,000 divided by 2 = $44,500 + $2,000. When John and Mary return to SRS, having reduced countable resources to this eligibility threshold, they would sign an "intent to transfer".  This gives them 90 days to place up to $2,000 in the name of the ill spouse and take the ill spouse's name off the remainder ($46,500) of the assets, placing them in the name of the well spouse up to the allowance determined by the division.  It is probably good to again note the Omnibus Reconciliation Act of 1993 and the HIPA Act of 1996 make it illegal to do advance planning in order to obtain Medicaid assistance, such as giving away assets.  Assets transferred to a trust have a look-back period of 5 years.  Assets transferred otherwise have a look-back period of 3 years.  Not only will transferring assets during the look-back period render the person or persons ineligible for Medicaid for a number of months equal to the amount transferred divided by $2,000, but the process itself is also punishable by fine and imprisonment. Upon approval for Medicaid by SRS, and for nursing home care, SRS would allow the well spouse up to $1,407 of joint monthly income and more if they have a rent or mortgage payment over $233 per month.  When the ill spouse is not in a nursing facility, but is receiving Medicaid HCBS (home-care-based-services) at home, an additional $707 per month could be allowed.  These amounts go up each year in January.  In a Nursing Facility, only $30 per month is protected for the ill spouse since food and shelter are provided.  After allocating income to the well spouse and subtracting out the protected income ($707 for HCBS and $30 for the nursing facility), the recipient pays the remainder of their countable income less non-covered medical expenses and health insurance premiums, to the nursing facility or HCBS provider.  Medicaid would then pay the difference between the share of the cost of care paid by the recipient and the Medicaid rate for cost of the care for the ill spouse for as long as the care was needed. SRS would file a 'first class claim' on the home and the car (and any other protected assets) for the ongoing difference between the cost of the care and the amount of the unprotected joint monthly income.  The only claim that can take precedence over a 'first class claim' is a claim for final expenses.  There is no interest figured on this first class claim.  The executor of the estate of the surviving spouse would then pay this claim.  If the well spouse also needed Long-Term Care, he or she would also have to spend down his or her assets on care, and then go through the same process, as did the first ill spouse.  This of course would make the first class claim grow at a much faster pace. It's also important to recognize that when John and Mary do things with their assets (i.e. buying a burial plan, remodeling the house, up-scaling their transportation), the timing in relation to the date of the resource assessment is critical. The date of the resource assessment must be the first month that the ill spouse was in an institution for a stay of at least 30 days, or the month the ill spouse was assessed for and chose HCBS.  Whether they spend money, buy a condo, or sell their house or car before or after this date makes a big difference. John and Mary may have another option.  They may be able to avoid the unpleasant situation detailed above, and make it possible to pass along more of the their estate to their grandchildren, by purchasing a joint Long-Term Care policy.  While their health considerations might render them uninsurable with some companies, it is possible that other companies may underwrite these health considerations and issue them a policy.  John and Mary do have some disposable income between their Social Security checks and their household budget to pay for this policy, but perhaps the best source would be from the earnings of their CDs.  Once they consider the alternative, they may decide they could never find a better use for these funds than to buy a policy that would cover all or most of the cost of the care they might ever require, as well as protecting and preserving their assets, their independence, their peace of mind, and those of their family.  The annual earnings from their CDs would only cover a few weeks of the cost for Long-Term Care, yet these earnings together with some of their disposable income, could fund a policy that once either of them or both qualified for benefits, would:* Provide benefits payable for life; * Have a zero-day elimination (meaning benefits would begin the first day they required such care); and* Pay the cost of care up to $90 per day for each spouse (or up to $180 per day for both spouses) in a nursing home or assisted living facility.Further, this policy should have an Alternative Plan of Care rider which could possibly pay for care at home, if either spouse qualified for benefits to go to a nursing home anyway, if that spouse wanted to receive the care at home, if their doctor would approve such care at home, and if the cost of this care was less than what the company would pay in a nursing home or assisted living residence. This Alternative Plan of Care must be agreed to by the Insured, the Insured's Doctor, and the Insuring Company.Assuming that both spouses could qualify for the coverage, the cost for a policy like this would fit within the range of affordability for John and Mary.  As stated earlier, it could be funded with the earnings from the CDs, and a small portion of their monthly disposable income.  If they felt more comfortable with even a lower premium, they could go to a 4-year benefit period (instead of lifetime benefits) on each spouse (which would be longer than the average time of care usually required). This would only be recommended if the couple would feel more comfortable with the lower premium.  Sometimes a policy will make sense, other times it will not.  It does appear however in this case it would be much easier for them to find a few hundred dollars a month now to buy the policy than it would be for them to find a few thousand dollars a month later to pay for this care, if they needed it.